MGP Ingredients, Inc. Reports Second Quarter 2014 Results

Continued Strength in Beverage Alcohol and Lower Costs Drive Growth in Operating Income

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| Source: MGP Ingredients, Inc.

Highlights

  • Net sales up vs year ago due to volume growth in beverage and industrial alcohol
  • Net income of $5.1 million, or $0.28 per diluted share, compared with $0.02 a year ago
  • Income from operations of $3.1 million, compared with $0.5 million in the prior year quarter

ATCHISON, Kan., Aug. 7, 2014 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI) (the "Company") today reported results for the second quarter ended June 30, 2014. Net income was $5.1 million, or $0.28 per diluted share, compared to net income of $0.3 million, or $0.02 per diluted share, in the second quarter of the prior year. Second quarter net income included $2.3 million in equity earnings from the Company's joint ventures.

Net sales of $80.6 million for the second quarter increased by 1.5 percent from the year-ago quarter. Beverage alcohol sales improved significantly on higher shipments from the Indiana distillery. Increased sales of industrial alcohol were offset by lower sales of by-products. Ingredient segment sales in the second quarter declined from a year ago. The Company's gross profit during the second quarter was $8.4 million, or 10.4 percent of net sales, compared to $5.3 million, or 6.7 percent of net sales in the prior year period.

For the first six months of 2014 net sales were $159.6 million, a decrease of 3.8 percent from the prior year period. Income from operations for the year to date was $4.8 million, an increase of 166 percent from the same period a year ago. Net income of $9.9 million for the first six months includes $5.7 million in equity earnings from the Company's joint ventures, compared with a joint venture loss of $0.9 million during the same period a year ago.

Premium Spirits and Industrial Alcohol

The distillery products segment reported second quarter pre-tax operating income of $6.0 million, or 9.1 percent of distillery products net sales, compared to $3.1 million, or 4.9 percent of distillery products sales, during the same quarter a year ago. Lower corn costs were mainly responsible for the improvement in return on sales over the prior year. The average per-bushel cost of corn decreased 35.7 percent from second quarter 2013, while the per-million cubic foot cost of natural gas was essentially unchanged. Distillery products sales for the second quarter were $65.4 million, an increase of 2.3 percent compared to the prior year quarter. Higher volume in all categories was somewhat offset by lower pricing.

Distillery segment results for the first six months include pre-tax operating income of $11.4 million, or 8.8 percent of distillery products sales, compared to pre-tax operating income of $7.5 million, or 5.6 percent of distillery products sales, during the same period a year ago. The average per-bushel cost of corn decreased 37.6 percent from second quarter 2013, while the per-million cubic foot cost of natural gas increased by 9.9 percent.

Food Ingredients

The ingredients segment reported second quarter pre-tax operating income of $1.4 million, or approximately 9.5 percent of sales, compared to $0.9 million, or approximately 5.7 percent of sales, for the same quarter a year ago. Profitability in this year's second quarter was positively impacted by product mix and lower flour prices compared to a year ago. The price of flour decreased by 13.5 percent year-over-year. Total ingredient segment sales for the second quarter declined by 2.1 percent to $15.2 million from the prior year.

Ingredients segment results for the first six months include pre-tax operating income of $1.7 million, or approximately 6.0 percent of sales, compared to income of $2.7 million, or approximately 8.6 percent of sales, for the same period a year ago. The price of flour decreased by 12.2 percent from the same period a year ago.

Summary

The Company continues to show improved operating performance compared to a year ago, driven by demand for premium beverages, positive fundamentals for industrial alcohol, and lower raw material costs. The Company's focus on costs includes reduced levels of selling, general and administrative expenses, after adjusting for severance and proxy-related costs incurred in the prior year.

About MGP Ingredients

MGP is a leading independent supplier of premium spirits, offering flavor innovations and custom distillery blends to the beverage alcohol industry. The Company also produces high quality food grade industrial alcohol and formulates grain-based starches and proteins into nutritional, as well as highly functional, innovations for the branded consumer packaged goods industry. The Company is headquartered in Atchison, Kansas, where it also has facilities for the production of distilled spirits and food ingredients. Distilled spirits are additionally produced at the Company's facility in Indiana. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements as well as historical information.  All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding the prospects of our industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements.  In addition, forward-looking statements are usually identified by or are associated with such words as "intend," "plan," "believe," "estimate," "expect," "anticipate," "hopeful," "should," "may," "will," "could," "encouraged," "opportunities," "potential" and/or the negatives of these terms or variations of them or similar terminology.  They reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results and are not guarantees of future performance.  All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement.  Important factors that could cause actual results to differ materially from our expectations include, among others: (i) disruptions in operations at our Atchison facility, Indiana plant, or at the Illinois Corn Processing, LLC ("ICP") facility,  (ii) the availability and cost of grain and fluctuations in energy costs, (iii) the effectiveness of our corn purchasing program to mitigate our exposure to commodity price fluctuations, (iv) the competitive environment and related market conditions, (v) the ability to effectively pass raw material price increases on to customers, (vi) the volatility in operating results of the ICP joint venture, (vii) ICP's revolving credit agreement with an affiliate of SEACOR (our greater than 9 percent equity owner and the parent company of ICP Holdings who is our 70 percent joint venture partner in ICP), (viii) our limited influence over the ICP joint venture operating decisions, strategies or financial decisions (including investments, capital spending and distributions), (ix) our ability to source product from the ICP joint venture or unaffiliated third parties, (x) our ability to maintain compliance with all applicable loan agreement covenants, (xi) our ability to realize operating efficiencies, (xii) actions of governments, (xiii) and consumer tastes and preferences.  For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distillery and Ingredient segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2013, as updated by Item 1A. Risk Factors of the Quarterly Reports on Form 10-Q for the periods ended March 31, 2014, and June 30, 2014.

MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
         
(unaudited) Quarter Ended Year to Date Ended
(Dollars in thousands, except per share) June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Sales  $ 85,903  $ 83,707  $ 170,485  $ 172,425
Less: excise taxes 5,336 4,312 10,922 6,626
Net sales 80,567 79,395 159,563 165,799
Cost of sales 72,169 74,114 144,364 153,289
Gross profit 8,398 5,281 15,199 12,510
         
Selling, general and administrative expenses 5,166 4,770 10,238 10,645
Other operating costs 160 160 58
Income from operations 3,072 511 4,801 1,807
         
Interest expense, net (218) (277) (416) (560)
Equity method investment earnings (loss) 2,331 71 5,666 (871)
Income from continuing operations before income taxes 5,185 305 10,051 376
Provision for income taxes 86 25 167 25
Net income from continuing operations 5,099 280 9,884 351
         
Discontinued operations, net of tax 1,406
Net income 5,099 280 9,884 1,757
         
Other comprehensive income (loss), net of tax 500 (141) 325 (290)
Comprehensive income  $ 5,599  $ 139  $ 10,209  $ 1,467
         
Basic and diluted earnings per share        
Net income $ 0.28 $ 0.02 $ 0.55 $ 0.10
         
Weighted average shares outstanding – Basic 17,277,225 17,003,056 17,261,824 17,003,056
Weighted average shares outstanding – Diluted 17,277,225 17,003,081 17,261,824 17,003,081
 
 
MGP INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
(Dollars in thousands) June 30, 2014 December 31, 2013 (Dollars in thousands) June 30, 2014 December 31, 2013
ASSETS     LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Assets:     Current Liabilities:    
Cash and cash equivalents  $ 883  $ 2,857 Current maturities of long-term debt  $ 1,583  $ 1,557
Receivables 34,737 27,821 Accounts payable 18,342 23,107
Inventory 31,947 34,917 Accounts payable to affiliate, net 3,268 1,204
Prepaid expenses 2,097 848 Accrued expenses 7,314 8,282
Deferred income taxes 3,303 4,977 Total Current Liabilities 30,507 34,150
Refundable income taxes 176 466 Other Liabilities:    
Total Current Assets 73,143 71,886 Long-term debt, less current maturities 2,814 3,611
      Revolving credit facility 19,009 18,000
Property and equipment 196,796 194,687 Deferred credit 4,098 3,925
Less accumulated depreciation and amortization (130,342) (124,443) Accrued retirement, health and life insurance benefits 3,720 4,423
      Other noncurrent liabilities 684 640
Net Property, Plant     Deferred income taxes 3,303 4,977
and Equipment 66,454 70,244 Total Liabilities 64,135 69,726
           
           
Equity method investments 12,786 7,123 Stockholders' equity 90,639 81,603
Other noncurrent assets 2,391 2,076      
TOTAL ASSETS  $ 154,774  $ 151,329 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 154,774  $ 151,329
           
Capital Structure          
Net Investment in:     Financed By:    
Working capital $ 42,636 $ 37,736 Long-term debt* $ 21,823 $ 21,611
Property, plant and equipment 66,454 70,244 Deferred liabilities 11,805 13,965
Other noncurrent assets 15,177 9,199 Stockholders' equity 90,639 81,603
Total  $ 124,267  $ 117,179 Total  $ 124,267  $ 117,179
           
*Excludes short-term portion. Short-term portion is included within working capital.
Investors & Analysts:
George Zagoudis, Investor Relations
913-360-5441 or 
Media:
Shanae Randolph, Corporate Director of Communications
913-360-5442 or